The Philippines is expected to be the fastest-growing economy in Southeast Asia this year, according to Fitch Ratings.
Data from Fitch Ratings’ Asia-Pacific Sovereigns Credit Outlook for February showed that the Philippines’ gross domestic product (GDP) is projected to expand by 6.4% this year.
This will be the fastest growth in Southeast Asia, ahead of Vietnam (6.3%), Indonesia (5%), Malaysia (4.2%), Thailand (3.8%) and Singapore (2.3%).
Krisjanis Krustins, Fitch Ratings’ primary sovereign analyst for the Philippines, said Philippine GDP growth would likely remain above 6% in the next few years.
“We forecast real GDP growth of above 6% over the medium term, considerably stronger than the ‘BBB’ median of 3%, supported by large investments in infrastructure and reforms to foster trade and investment, including through public-private partnerships (PPPs),” he said in an earlier commentary.
Fitch Ratings’ forecast is slightly below the government’s 6.5-7.5% target this year.
The Philippine economy grew by 5.6% in 2023, slower than 7.6% in 2022 and fell short of the government’s 6-7% full-year target.
Economic managers have said they might revise growth assumptions and targets to be more “realistic” and account for global economic conditions.
The Philippine Statistics Authority (PSA) is set to release first-quarter GDP data on May 9.
For 2025, Fitch expects Philippine economic output to expand by 6.5%. This also makes it the fastest-growing economy in the region next year, alongside Vietnam.
It will be ahead of Indonesia (5.2%), Malaysia (4.5%), Thailand (3.4%) and Singapore (3%).
In November, Fitch Ratings affirmed the Philippines’ “BBB” investment grade rating and kept its “stable” outlook.
A “BBB” rating indicates low default risk and reflects the economy’s adequate capacity to pay debt. A “stable” outlook on the rating also means it is likely to be maintained over the next 18-24 months.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Philippine GDP growth could settle at 6% this year and potentially in the next 10 years.
“Before the pandemic, Philippine GDP consistently grew by at least 6% from 2012-2019 due to the demographic sweet spot and other important economic bright spots,” he said in a Viber message.
He cited strong remittances, low unemployment, improved government spending and the uptick in tourism as growth drivers.
Meanwhile, Fitch sees inflation averaging 4% this year, within the central bank’s 2-4% target. However, it is above the Bangko Sentral ng Pilipinas’ (BSP) average forecast of 3.6% for the full year.
It also expects inflation to ease further to 3.5% next year, above the BSP’s forecast of 3.2%.
The BSP earlier said it expects inflation to accelerate above the 2-4% target in the second quarter due to the El Niño weather event, as well as positive base effects.
Meanwhile, Fitch Ratings raised its global GDP growth projection by 0.3 percentage point to 2.4%, as it expects faster US growth.
In its latest Global Economic Outlook, the debt watcher said it also raised its US growth forecast to 2.1% from 1.2%.
It trimmed its China growth forecast to 4.5% for this year from 4.6%.
“An unprecedented pro-cyclical widening in the US fiscal deficit in 2023 boosted domestic demand and helped explain the surprising resilience of GDP growth,” Fitch said. “But we expect the fiscal impulse to fade this year and household income growth to slow.”
For 2025, Fitch expects global economy to grow by 2.5% as “the eurozone finally recovers on a pickup in real wages and consumption — but US growth slows.”
Source: Business World